Bitcoin Risks Slide to $9.5K After Sudden $700 Price Drop

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Bitcoin quickly fell from $10,842 to $10,082 earlier today, confirming a rising wedge breakdown on the hourly chart. The bearish reversal pattern has opened the doors for a retest of $9,467 (Aug. 15 low).

On the way lower, prices may find support at the 100-day moving average, currently at $9,882. The average served as strong support earlier this month.

The bearish case would be invalidated if prices rise above $11,000 with high volumes in the next 24 hours. As of writing, that looks unlikely.

A convincing move above $12,000 is needed to revive the bullish setup, as per the weekly chart.

The top cryptocurrency fell from $10,843 to $10,082 in the eight hours to 07:00 UTC, confirming an end of the bounce from the Aug. 15 low of $9,467.

Prices slipped into four digits on Aug. 13 and extended gains to levels above $10,900 on Monday. That was bitcoin’s fourth quick recovery from sub-$10,000 levels since the beginning of July.

As a result, some observers are convinced that a new base has been established under $10,000 and the cryptocurrency could soon resume the rally from April’s low near $4,050.

While that seems logical, the latest bounce from $9,467 lacked volume support, as discussed yesterday, and was expected to be short-lived.

Hence, the price drop seen today is not surprising and could be extended further, as it marks a downside break of a rising wedge pattern, a bearish reversal setup, created by the recent price rise from $9,467 to $10,956.

As of writing, BTC is changing hands at $10,132 on Bitstamp, representing a 5.46 percent loss on the day.

4-hour chart

The rising wedge breakdown seen on the 4-hour chart indicates the bounce from the Aug. 15 low of $9,467 topped out at $10,956 on Monday and the sellers have regained control.

It’s worth noting that, as per technical theory, the price seen at the beginning of a rising wedge formation becomes the minimum downside target once a breakdown is confirmed. So, a drop to $9,467 could be seen over the next couple of days.

Supporting the bearish case are a below-50 reading on the relative strength index and a bearish reversal on the the moving average convergence divergence (MACD) histogram.

The outlook would turn bullish if prices rise above $11,000 in the next 24 hours, although as of writing, that looks unlikely.

Daily chart

On the daily chart, the RSI remains in the bearish territory below 50.00. The MACD is also holding bearish below zero.

Bitcoin has also found acceptance below the 5-, 10- and 50-day moving averages.

So, a drop to the 100-day MA at $9,882 could be seen – a level that served as strong support on Aug. 15 and Aug. 16.

A UTC close below the 100-day MA, if confirmed, would bolster the bearish setup.

Weekly chart

BTC’s rejection near $11,000 and the subsequent drop to $10,100 has reinforced a bearish crossover of the 5- and 10-week moving averages, currently located at $10,506 and $10,638, respectively.

The MACD histogram continues to produce lower highs and is currently reporting the weakest bullish momentum in six months.

With the path of least resistance to the downside, support at $9,049 (May low) stands exposed.

On the higher side, a weekly close (Sunday, UTC) above $12,000 is needed to revive the bullish setup.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

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This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.